Home and Tenant Insurance
Buying a home is probably the largest single financial investment you have ever made. For most people, their home is their life savings tied up in bricks and mortar – bricks and mortar that, no matter how well built, are vulnerable to fire, theft and other
Could you possibly afford to replace absolutely everything you own? Recovering from even a partial loss, like having your home broken into and many possessions stolen, would cost more than most people could manage on their own. Home insurance protects you from having to pay out a huge amount at once, often at the very worst time emotionally.
Tenants need insurance too. If you don't have insurance, you would be held responsible if your actions (e.g., leaving the bathtub running) caused damage to:
- your apartment
- your neighbours' apartment(s)
- the apartment building itself
Even if the landlord's or your neighbours' insurance covered the damage claims, their insurance companies would come to you to recover costs for repairs and/or replacement of:
- the structure of the building
- your neighbours' damaged property
Tenant insurance protects you from having to cover these costs out of your own pocket..
If you are like most people, you will probably never need to submit an insurance claim. But home or tenant insurance is peace of mind that you really shouldn't live without.
Types of Home Insurance Policies You Can Buy and What They Cover
There are several types of insurance polices you can purchase. Please remember that the wording and what is covered may vary within these general categories from one insurance company to another. Trade names may also be used.
This is the most inclusive home insurance policy; it covers both the building and its contents for all risks, except for those specifically excluded. There are two types of insurance risks that are not normally included in any home insurance policy – those for which you can buy insurance (“optional coverage”) and those for which insurance is not available (“uninsurable peril").
If you are looking to save money by carrying the financial risk of some losses yourself, you may wish to consider a named perils policy that covers only those perils that are specifically stated in the policy.
If the comprehensive policy costs more than you want to pay and the named perils policy seems too risky, a mid-priced compromise is the broad insurance policy. This policy provides comprehensive coverage on the big-ticket items like the building and named perils coverage on the contents.
Some insurers offer very basic or “No Frills” coverage for properties that don’t meet their normal standards. If there are physical problems with your home that keep it from meeting insurers' standards, you may save money in the long run by correcting these problems in order to qualify for better coverage.
What Insurance Companies Look For When Insuring Your Home
Before an insurance company can arrive at an appropriate premium, it must first assess the likelihood – or risk – that you will submit a claim. For the most part, the lower the risk – e.g., a well-maintained home with updated wiring and plumbing – the lower the insurance premium. (Some insurance companies specialize in riskier clients and their homes.)
Your insurance representative will ask you a number of questions about your home. Insurance is based on good faith, so it’s important that you give complete answers. Policies vary, but here are a few things about which your company will ask.
Wiring: Some wiring (e.g., knob-and-tube, aluminum) can increase the chance of a fire, especially if the wiring has deteriorated or been damaged during renovations. Some insurance companies want a guarantee that a home does not have this wiring, some may give you time to have it removed, while others might request an inspection to ensure its safety.
Galvanized/lead pipes: Galvanized or lead piping usually means that the plumbing is older, and older plumbing is more susceptible to cracks, leaks and other problems. Insurance companies generally prefer homes where the plumbing has been upgraded to copper or plastic.
Electrical service: It is preferable to have breakers instead of fuses, and 100-amp service at a minimum. Fuses and lower electrical service can increase chances of a fire.
Heat source: Oil-heated homes can present a costly environmental, so your insurance representative will ask for many details about the age and condition of your tank. Insurance companies tend to prefer forced-air gas furnaces or electric heat.
Wood stoves: These are a common source of house fires and carbon-monoxide poisoning, particularly if they are not properly installed and maintained. Insurance companies may want to inspect such installations. Consult your insurance representative before buying or renting a home with a wood-burning stove or installing one.
Age of roof: Companies generally prefer it if your roof has been updated within the last 20 years. Some policies will pay only depreciated values, as low as 25%, for damaged roofs near the end of their designated service life.
Other uses of your home: Companies will want to know if you have built or are planning to build a rental apartment into your home, begin operating a business there or make any other significant alterations to the structure or the way it’s used.
Extra Protection You Can Buy
There is additional protection, otherwise known as optional coverage, you can buy depending on where your home is and how much peace of mind you require. These perils are not automatically included in any home insurance policy. If you want to be protected against these risks, you must purchase coverage separately.
This coverage is especially worth considering if you live in a quake-prone region, such as parts of Quebec — especially around Montreal — the Ottawa Valley and British Columbia. Earthquake insurance generally covers loss or damage to your property caused by the actual shaking of the earth. It is subject to a higher deductible than the other perils insured by your policy. Your ordinary homeowner’s policy, on the other hand, would likely not cover this peril. However, if the shaking were to cause a gas main to break and ignite, the damage as a result of the subsequent fire would probably be covered under your homeowner’s policy.
The cost depends on where your house is and how it was built. Your insurer may be able to advise you of things you can do to cut the risk of earthquake damage to your home.
This coverage is useful in some low-lying areas, especially if your area has storm and sanitary sewers combined. You may also want to install a back-flow prevention device, where permitted by local codes.
Insurance Bureau of Canada encourages Canadians thinking of renting out their homes, in full or in part, to contact their insurance representatives to make sure their home insurance provides adequate coverage and that no exclusions apply to their specific situations.
RENTING OUT YOUR PRIMARY RESIDENCE
A major sporting or cultural event is coming to your city. You decide to rent your home to visitors for a few weeks and take a holiday. When you return, you discover that a burglary has occurred and your jewellery has been stolen. You call your insurance carrier to make a claim.
Your homeowner’s policy was designed specifically for you, and sold to you with the expectation that you, the owner, would reside in the dwelling. Some policies may not permit you to rent your home to someone else, even for a short period of time.
Before you rent your home, or even a portion of it, check with your insurance representative to determine how such arrangements may affect your insurance coverage.
SUBLETTING YOUR APARTMENT
You rent a small apartment downtown. You are planning to travel overseas for an extended vacation. With your landlord’s permission, you sublet your apartment to a friend of a friend. When you return, water damage from an overflowing toilet in your unit has damaged not only your apartment, but the apartment below. You do not have tenant insurance, and you were not in the country when the damage occurred.
Many tenants do not realize that they are responsible for damage that they cause to any part of the building in which they live or for damages caused to others who live in the same building or to visitors.
Therefore, even if someone else causes damage while subletting your apartment, you may be held responsible because you are the one who signed the lease or rental agreement.
To adequately protect yourself, you should first purchase tenant insurance. In addition, you should explain to your insurance representative that you intend to sublet your apartment for a short period of time.
RENTING OUT YOUR SECONDARY RESIDENCE
In addition to owning a home in the city, you also own a summer cottage. Normally, you use the summer property, but this year you decide to rent it out. You find some suitable renters online. One morning, one of your renters accidentally starts a grease fire in the kitchen. Fortunately, no one is seriously injured, but your cottage is gutted. You phone your insurance representative to make a claim
Before renting out your premises, or even a portion of them, check with your insurance representative to determine if your current insurance coverage is adequate. Your policy may need to be changed in order to provide you with sufficient protection against potential liability and your premises with sufficient coverage in the event of a partial or total loss.
Types of Tenants’ Insurance You Can Buy and What They Cover
Landlords have relatively few legal obligations to compensate tenants for damage to, or loss of, their personal possessions. Tenants, on the other hand, are responsible for the harm they may cause to any part of the building in which they live or to others who live or visit there.
Each insurance company packages tenants’ insurance policies differently or calls the products by different names, but they all (should) include two kinds of coverage – Basic Liability coverage and Contents coverage.
Basic Liability coverage protects you if you or your guests cause damage to the building – whether it be your unit or the whole building. If you don’t have this protection and you are sued for the repair costs, you could be financially responsible for the whole bill. This coverage is comparable to the liability coverage in a typical homeowners’ policy.
Contents coverage replaces your belongings if they are lost or damaged. You may think you have little of value, but you would be very surprised how much it would cost you to replace everything – all at once. You should insure for an amount representing the new replacement cost of all your belongings. Coverage is on a named perils or an all risk basis.
Insurance for Cottages, Camps and Other Vacation Properties
Your vacation property is, like your home, one of your most valuable assets. It’s important to protect your investment with insurance. But you should note that vacation property insurance works a bit differently than insurance for your primary home.
How’s it used?
How the vacation property is used and how often it is occupied will dictate which insurance packages are appropriate for you. How much time do you spend there? Do you use it year-round? Do you rent it out at some point during the year? The answers to these questions are important when you are considering what type of coverage to buy for your vacation property.
Coverage's for your vacation property
Most insurance companies will consider providing insurance for your vacation property only if you insure your primary residence with them as well. You can have your vacation property listed on your home insurance as a “secondary” or “seasonal” location, or you can have insurance for the property as a separate, stand-alone policy.
There is one main difference between insurance for you primary home and insurance for your vacation property: Vacation property insurance is almost always provided as a named perils policy, instead of a Comprehensive policy, because of the risk associated with the part-time occupation of the vacation home. “Named perils” means you have insurance coverage for specific risks, such as fire, explosion or smoke damage. Coverage for certain risks, such as water damage or vandalism, may be more difficult or expensive to arrange, because of the part-time occupancy. For example, if a water pipe bursts or if vandals break into your vacation home while it is vacant, the damage is likely to be more severe because no one will be there to take action.
There are some common exclusions in insurance policies for second homes. These include coverage for sewer back-up and damage to, or loss of:
- food in a freezer
- garden equipment
- outdoor plants
- trees and shrubs
Even if you have a “fixer-upper” and the building is worth little, you will still need to have Third-Party Liability coverage to protect yourself in case someone gets hurt on your property or if you happen to start a fire that spreads to neighbouring properties.
Some other coverage's you may want to consider including are:
- Contents coverage: Some vacation property packages provided by your insurance company automatically include contents up to a certain limit. This coverage applies to contents that are permanently kept at the vacation home. (Anything that you take back and forth – e.g., clothing – is covered by your primary home insurance policy.) If coverage provided is inadequate, additional coverage may be purchased.
- Detached private structures: Some vacation property insurance packages include a limited amount of coverage for any outbuildings, including boathouses, garages, or sheds. But you may need additional coverage to ensure that you are fully protected.
- Replacement cost: This type of coverage covers the cost of repairing an item or replacing it with a new one, without any deduction for depreciation.
To get more information about your vacation property insurance options, please contact your insurance representative.